Pilot strike disrupts thousands of flights

Chaos broke out in major German airports after pilots of Deutsche Lufthansa AG entered their 14th strike since early 2014. More than 350,000 passengers who planned to travel for the Thanksgiving holiday were affected by the labor action. The walkout puts further earnings pressure on Germany’s flagship carrier, which has had to contend with weaker ticket prices from its low-cost competitors such as Ryanair Ltd. Airline companies have benefited from the fall in oil prices this year, allowing them to offer competitive savings and discounts to win over passengers.

Disputes over wages and working conditions have been ongoing at Lufthansa since the company’s last pay raise. Vereinigung Cockpit, the union representing nearly 5,400 pilots, called for an average annual wage increase of 3.7 percent over five years from 2012. The union claims that the wage freeze hurt many pilots who have lost purchasing power due to inflation. In addition, the pilots argue that the company has been making record profits, with its management and board members reaping most of the rewards. Some of the carrier’s top executives were given pay raises as much as 30 percent in recent years.

“The status quo is that we pay our pilots significantly more than our competitors do,” said Harry Hohmeister, chief officer hub management  of Lufthansa, in a response to the protests. “As members of the executive board, we are responsible for more than 120,000 employees and want to keep Lufthansa viable for the future. That will not be possible with a demand for a 20 percent increase in pay.”

Lufthansa responded with an initial offer to increase wages by 2.5 percent, but later lifted it to 4.4 percent with a one-off payment equivalent to nearly two months’ salary. The new offer would increase wages by 2.4 percent in 2016 and an additional 2 percent in 2017.

After failing to negotiate terms, the union extended the strike two more days as turmoil for travelers continued. Pilots for short-haul flights were told not to report to work on the fifth day of strikes and pilots on longer flights were asked to join on the sixth day. The airline requested for a temporary injunction to prevent the union from resuming the strike, which is costing the company around 10 million euros each day, but the Munich Labor Court rejected the bid.

Lufthansa Chief Executive Officer Carsten Spohr offered to take the matters to arbitration, but added more fuel to the fire by reviving a 2-year-old lawsuit against the union totaling 60 million euros for damages from previous strikes over the years.

In a press release on Wednesday, Nov. 30, Lufthansa’s Bettina Volkens, chief officer of Corporate Human Resources and Legal Affairs, shared, “We want to get back to the negotiating table as quickly as possible, as desired by the VC, we can then successively negotiate on all the currently-open collective labor agreement issues. And this in turn should lead us back to long-term industrial peace and a sound social partnership.”

The recent strikes have mounted to hundreds of millions of euros in losses for Lufthansa since its first demonstrations in 2014. According to the Cologne Institute for Economic Research, the walkouts cost Lufthansa 222 million euros alone in 2014 and an additional 231 million euros in 2015.  While the protests over the years have certainly put the German carrier in a financial bind, this time it could prove to be more detrimental to the company than just its bottom line.

BusinessBusinessComment